Ford takes the right turn

Posted: Saturday, July 24, 2010

By DEE-ANN DURBIN and TOM KRISHER

DEARBORN, Mich. - Four years ago, Ford mortgaged everything down to the blue oval logo to save itself. Now, even as Americans remain skittish about the economy, it's reaping big rewards and stealing business from stumbling rivals.

Ford said Friday that it made $2.6 billion from April through June, its fifth straight quarterly profit. The company, which reported record losses last year, now predicts it will end 2011 with more cash than debt.

With its two longtime Detroit rivals still finding their way after spending time in bankruptcy last year, Ford, which never took government bailout money, extended its success story.

President and CEO Alan Mulally said the company is ahead of where he thought it would be in its turnaround. It now sells the most popular pickup truck in the U.S., the F-Series, and the most popular crossover SUV, the Escape.

"Our performance this year gives us great confidence going forward," he said.

In the past year, Ford has gained a bigger share of the American market, the equivalent of about 154,000 cars and trucks. Rivals Toyota, General Motors and Chrysler have all lost ground.

Toyota stumbled this year because of safety-related recalls. GM and Chrysler's precarious financial positions had some people shying away from their cars for fear they would not be able to find service.

Mulally, a tough manager masked by a boyish face and gee-whiz demeanor, joined Ford in October 2006, a year into a turnaround plan that called for closing plants, cutting jobs and dropping some of its models.

He removed obstacles, put new managers in place and forced feuding parts of the company to work together. He had cards printed out for every employee exhorting people to work together and accelerate development of new products - and carries one in his own pocket. In weekly management meetings, he holds people accountable but also greets success with applause.

Michael Robinet, an analyst for the consulting firm IHS Automotive, credits Mulally with motivating the work force. But he said the biggest reason for Ford's success is a complete overhaul of its factory and sales strategies.

When the company was losing billions last decade, it kept cranking out cars and trucks even if they weren't selling, because high labor costs made it too expensive to shut down production.

But late in 2008, the United Auto Workers union gave up a provision known as the jobs bank, in which automakers had to pay laid-off workers even if their plants were closed.

Now, workers have to take jobs at other factories or risk losing wages and benefits. With 12 fewer factories and a North American work force that is half the 140,000 people it was five years ago, Ford can limit production when demand is slow.

Ford's leaner development system allows more of its cars and trucks to share parts. The new Fiesta subcompact, for example, will be sold around the world with only minor variations. And Ford plans to bring at least six vehicles from Europe to North America in the next few years, including a new Focus and the C-Max minivan.

High quality rankings from outside groups like Consumer Reports have also helped Ford command higher prices. The average selling price of a Ford last quarter was about $2,000 higher than a year earlier, according to Edmunds.com.

Ford Chief Financial Officer Lewis Booth said the commitment to new and better products like the Ford Fusion sedan is the biggest factor in Ford's turnaround, allowing Ford to bring in more money while keeping costs competitive.